Cape Verde: Statement at the Conclusion of an IMF mission

An International Monetary Fund (IMF) mission led by Ms. Valerie Cerra visited Cape Verde during May 18-31, 2011 to conduct discussions on the first review under the Policy Support Instrument (PSI), which was approved by the IMF Executive Board in November 2010. The mission met with Finance Minister Cristina Duarte, Central Bank Governor Carlos Burgo, Parliamentarians and other government officials, and representatives of civil society and the private sector. At the conclusion of the visit, Ms. Cerra made the following statement:

“Cape Verde’s economic recovery continues at a solid pace, supported by a resilient tourist sector and rapid implementation of the public investment program. The mission supports the government’s focus on efficiently implementing the program of public investment to boost long-term growth while safeguarding the sustainability of debt. A gradual reduction in the public debt ratios would help support private sector-led economic growth.

“Inflation has picked up in recent months due to the surge in international prices of food and energy. The authorities have responded appropriately to these shocks by allowing the relative price increases to be reflected fully in domestic prices, while protecting competitiveness by restraining the second round impact on wages. Measures to improve labor market flexibility would also help improve competitiveness and foster job growth. Targeted measures to protect the poor and vulnerable from the impact of the renewed international shocks are also welcome.

“The exchange rate peg remains an appropriate monetary anchor. The tight stance of monetary policy is constraining the growth of private credit to stabilize foreign reserves. The mission agreed with the authorities’ initiatives to enhance the effectiveness of monetary policy and to develop interbank and government debt security markets.

“The mission completed discussions with the Cape Verde government on the first review under the PSI, which is expected to be considered by the IMF’s Executive Board in July. The mission would like to thank the authorities for their warm hospitality, the timely provision of required information, the productive and open discussions, and the excellent cooperation during the mission.”